OPEC Stuns Markets with Surprise Output Hike, Sending Oil Prices Lower

Highlights:

• OPEC+ to raise oil output by 411,000 barrels/day in May, tripling the initially planned increase in a surprise move aimed at curbing member non-compliance.
• Saudi Arabia’s Energy Minister warned the hike was just an "apéritif" if overproducing nations like Iraq and Kazakhstan don’t adhere to quotas.
• The decision, combined with fresh U.S. tariffs, intensified pressure on crude prices, evoking memories of the 2020 oil price war.

 Alliance shifts strategy as Saudi Arabia punishes non-compliant members

In a surprising shift from its usual stance, the Organization of the Petroleum Exporting Countries and its allies (OPEC+), led by Saudi Arabia and Russia, made a bold move to ramp up oil supply far beyond expectations. During a video conference held on Thursday (Friday AEDT), the group approved an increase of 411,000 barrels per day in May—three times the planned rise—aimed at disciplining members breaching production limits.

Strategy Shift to Rein in Cheaters

For years, OPEC+ has been a steady force behind supporting global oil prices by tightly controlling supply. However, persistent overproduction by members like Iraq and Kazakhstan has tested Saudi Arabia’s patience. According to sources familiar with the meeting, Saudi Energy Minister Prince Abdulaziz bin Salman called the sharp supply boost just an “apéritif,” hinting at further increases unless compliance improves.

This hardline stance marks a significant deviation from the group’s usual cautious approach. It also reflects the growing internal strain within the alliance as its efforts to stabilise global oil markets stretch beyond initial expectations.

Combined Market Pressure

The timing of the output increase couldn’t have been worse for oil markets. The hike came a day after U.S. President Donald Trump’s announcement of new trade tariffs, which already had crude prices under pressure. The unexpected OPEC+ decision further accelerated the downturn, echoing memories of the brief price war seen during the early days of the COVID-19 pandemic in 2020.

At the time of writing, the market continues to digest the implications of OPEC+’s new approach, with analysts speculating whether this signals the start of a more aggressive phase in the group’s internal dynamics.

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